A new Department of Labor (DOL) final rule has eliminated some exceptions to the fluctuating workweek pay method. That gives your company some new flexibility and potentially some new savings.
In the past, that overtime compensation option wasn’t available for salaried non-exempt employees who earned bonuses and other types of incentive-based pay.
No more, thanks to the DOL’s latest update.
And experts say the change couldn’t come at a better time. The coronavirus pandemic has thrown companies and work schedules into chaos.
This new rule will allow employers to incorporate more flexible work schedules as many states and businesses start to re-open.
Here’s a breakdown of the new rule to ensure you benefit while keeping payroll in compliance.
These payments now OK with the fluctuating workweek method
The new rule gives your organization the green light to pay salaried non-exempt employees whose hours vary from week to week, even if they receive some sort of supplemental compensation, which can include, according to the DOL:
- premium payments
- commission pay, and
- hazard pay, which is something many of your peers may be offering for the very first time.
Now even if those payments are included, your company can pay them at 0.5 times the regular rate of pay for any overtime hours worked. After all, the hours have already been compensated at the straight time regular rate as part of the salary.
Of course opening this method up to these employees will likely bring down your company’s OT bill, since you won’t be paying time and a half.
Threats to your use of the fluctuating work week
Of course, there are some things to consider to keep your company in compliance with the final rules.
Remember, the salary must be high enough to ensure no one ever makes less than the federal minimum wage per hour.
But even if you stay in line with what the feds lay out, your state may pose an obstacle that keeps you from taking advantage of this new flexibility … or this method at all!
Pennsylvania and Alaska, for example, prohibit a fluctuating workweek pay arrangement.
Courts in New Jersey and New Mexico have ruled the use of the fluctuating workweek method is inconsistent and incompatible with their existing state laws.
California Labor Code limits the use of a fluctuating workweek and has different requirements for OT pay.
Other states restrict the types of employees allowed to work fluctuating workweeks. In Rhode Island, it’s a no-go for sales merchandisers or delivery workers; in Connecticut, you can’t use the method for retail employers.